Welcome to the New Year, and may 2016 be profitable. This month I am going to address several timely bidding and estimating questions to help your business kick off the New Year right.
Q: A client wants me to submit a bid for a new project that they have coming up in early 2016. However, they still have invoices from 2015 that remain unpaid. How should I handle this situation?
A: You should handle it as an opportunity. When a customer wants something, it’s a perfect time to ask for something in exchange. In this case, I’d submit a bid for the new project, with the stipulation—verbally and in writing—that the price is conditional on the client paying all outstanding invoices and paying the invoice for the new project on time or in advance. Add wording to the bid for a 10 percent discount if the invoice is paid on time or in advance, and a 25 percent penalty if paid late. Hold their feet to the fire for on-time payment or revise the invoice to include the agreed upon late payment penalty.
The best way to keep invoices from going unpaid is to call the customer the day the invoice is due, ask when you can pick up the check, and then show up at their office to pick it up. As a business owner, its part of your job to make sure that your customers know the only way you can give good service at a reasonable price is if you are paid on time for every invoice. If you make the calls and show up a few times if they are late, they usually get the message and pay you on time.
You don’t want to let customers get behind on invoices; you are a cleaning service, not a bank. If you are financing invoices, you are discounting your work, especially if you are using your credit cards to pay the bills instead of collecting for the work you have done from a customer. It is often less expensive to encourage and reward prompt payment by giving a discount, instead of borrowing money so they can pay someone else instead of you.
Q: I have a small cleaning business and wonder what type of accounts, projects, or facilities I should avoid to keep my business profitable and afloat in 2016 and beyond?
A: Anything that doesn’t fit your market demographic should be avoided. Accounts that involve a lot of travel or supervision are often problematic and low profit. Accounts that want service once per week or twice per month are difficult to please as they are price-only buyers. Avoid nasty, dirty, beat-up locations.
When bidding on accounts, if the last contractor left the place in bad condition, there is probably a reason, such as low pay or no pay. If a potential customer wants you to start tonight, I would also see that as a warning sign and ask for payment in advance.
Q: I have been running a cleaning business in Brooklyn, NY for two years and need help developing a pricing strategy and submitting proposals to prospective clients.
A: If you have been running a business for two years and have accounts that are profitable, you have a pricing strategy, but just haven’t formalized or documented what you are doing. Start by organizing all your previous bids for future reference, and put in writing some of the basics you need to know to implement a more organized and accurate pricing strategy. Examples of the numbers you need to know include labor, supply and overhead costs, profit percentage, burdened hourly rate, and billable hourly rate.
Do some research and you’ll find plenty of resources and information available to assist you. For example, during the annual ISSA/INTERCLEAN® show and BSCAI Convention, there are many seminars and workshops that can help you come up with a realistic pricing strategy, as well as information on submitting proposals.
Keep it clean out there.
